The mortgage interest deduction, a tax break that has helped many Marin residents afford their homes, dodged a bullet when the tax law passed by Congress this month to avert the "fiscal cliff" left the deduction in place.

The tax break will be scrutinized when fiscal cliff negotiations resume, but Rep. Jared Huffman, D-San Rafael, predicted the deduction will also survive those talks.

Congress also extended other real estate deductions and exclusions — good news for the Marin real estate industry, homeowners and home buyers.

"Without the mortgage interest deduction, we would be paying $500 or $600 more a month on our mortgage and couldn't afford a house," said Joshua Nadelberg of San Rafael, who is house-hunting with his wife Regan. The two have a 31/2-year-old toddler and a 9-month-old baby and want them to have a yard to play in as they grow up.

The video game developer and his wife, who is taking a temporary break from teaching kindergarten to be with the children, are paying $3,300 a month in rent.

Even with the mortgage deduction, the couple would be paying about $100 more per month if they purchase a $650,000 home, Nadelberg said. Without the mortgage deduction, a single-family detached home would be out of the question.

"The mortgage interest deduction is an important tax break for middle-class citizens," said Bob Ravasio, a real estate agent with Frank Howard Allen in Larkspur.

Ravasio also applauded the legislators for extending the Mortgage Forgiveness Debt Relief Act of 2007 through the end of this year.

"People who are forced to do a short sale will benefit because they will not have to pay taxes on the forgiven debt," said Ravasio.

A "short sale" is when a home is sold for less than the amount the homeowner owes on the mortgage. Because the lender, usually a bank, accepts less money than is owed, the forgiven amount theoretically is income that could be taxed.

"Imagine you have gone through this terrible situation, you've lost your home and you also have to pay income tax on the forgiven debt," Ravasio, a Corte Madera town councilman, said. Extending the debt relief act "will be a big boost to the housing market as well," Ravasio said, because it removes an obstacle to the homeowner selling the house.

"Debt forgiveness has typically been taxed as income," said Jack Wilkinson, president of the Marin Association of Realtors. "For people who are upside down and have to sell their houses, it's a real benefit not to have to pay taxes on it (the forgiven amount)."

The fiscal cliff deal also revived the deduction for mortgage insurance premiums. The deduction expired at the end of 2011, but has now been retroactively extended for the entire year of 2012 as well as 2013.

This affects people whose down payment is less than 20 percent of the house's price and hence must pay private mortgage insurance. It makes it possible to deduct the premiums.

"This is all definitely good news, but we're not out of the woods yet," said Edward Segal, chief executive of the Marin Association of Realtors, referring to the fact that the mortgage deduction might be under fire during the next set of negotiations.

Huffman, who took office last week as Marin's representative in the House, said he expects the deduction will endure.

"It is one of the most popular and widely used deductions, and I cannot imagine it going away," Huffman said. "I would be very surprised if either party wanted to mount a campaign to get rid of that deduction."

What could affect it, Huffman said, was the possibility of capping the amount of itemized deductions. "President Obama proposed a cap on itemized deductions that would be 28 percent of income. The Congressional Budget Office has floated a concept of 15 percent as the cap," Huffman said.

Regardless, the congressman said, "It wouldn't affect most taxpayers and most families. It would be a way for very high-income taxpayers to not be able to limit their tax liability.

"I personally would not support eliminating the mortgage interest deduction," Huffman said.